(ANSA) - Rome, December 19 - A proposed new agreement on
dealing with failing banks, hammered out in a lengthy meeting of
finance ministers, was headed for a summit of European leaders
on Thursday in a bid to form a united banking union after more
than a year talks.
Italian Premier Enrico Letta expressed optimism about the
outcome ahead of a European Union summit at which heads of
government were expected to put flesh on the agreement and
Described as a "historic achievement" by Italian Economy
Minister Fabrizio Saccomanni, the single-resolution mechanism
(SRM) agency is designed to prevent failures like the collapse
of Lehman Brothers in 2008.
That event has been widely seen as the tipping point that
led to a crippling global financial crisis resulting in a number
of bank failures, with frequent government bailouts aimed at
avoiding a collapse of interconnected financial systems.
Currency crises followed and numerous economies fell into
recession, including Italy which was hit twice with recession
between 2008 and present, with damage including over one million
Greece, Ireland, Spain, Portugal were also hit hard.
The new mechanism should ensure a rapid and orderly default
the next time a European bank falls, said Saccomanni following
more than 12 hours of discussion among finance ministers that
ended early Thursday morning.
"We have reached a historical agreement, almost on par with
the historical agreement that established the (euro) monetary
union," Saccomabankinni told reporters after the meeting.
"Such an agreement should pacify markets" and prevent
contagion if a big bank collapses, he said.
The SRM agency must be approved by the European Parliament
as well as national governments and many details must still be
The idea is that the next time a bank defaults, it will be
managed so as to avoid jeopardizing the wider financial system
and State treasuries.
"Taxpayers will no longer foot the bill when banks make
mistakes and face crises, ending the era of massive bailouts,"
said Michel Barnier, the EU's internal market commissioner.
Finance ministers agreed that decisions on winding up a
failing bank and sharing the costs will be made by a board
including five permanent officials and representatives from
As well, the board's decisions must be approved by EU
finance ministers, leading some critics to say the process will
be very complex and political.
In a second step, governments will contribute to a
resolution fund by imposing levies on banks over 10 years for a
total of about 55 billion euros.
Analysts worry however it may be insufficient.
The amount, for instance, would have been completely
exhausted by the 2010 Irish banking bailout alone.
Nevertheless, Premier Letta was optimistic.
"It seems like a step forward," he said, "and if we're able
to strike a good deal it will be a great step forward,
especially for those with savings (who will no longer have to
save the banks).
"It will be the banks' own responsibility".